Facebook is one of the largest social networking websites on the planet. As one of
the largest social networking websites on the planet, one would think that Facebook charges at least a nominal fee for membership however, it offers all of its members totally
free access. So, how can Facebook afford to offer free membership to literally hundreds-of-thousands of members world wide?
Advertising is the number one source of Facebook’s income. Specifically, user targeted advertising. “Facebook being a decidedly smart social networking institution knows which ad to put where” (Kulharni, 2010). Facebook uses your information to send ads your way. They do not send just any ads, but ads that you actually have an interest in. For example, you have “liked” or “become-a-fan-of” motorcycles, Facebook recognizes this as something you are interested in and places a small motorcycle related advertisement on the right side of your page.
Of course, Facebook is collecting a fee from the companies that place advertising on the site. These companies are usually charged on a pay-per-click basis, meaning that Facebook charges the companies every time a member clicks on that company’s ad. “Facebook advertisements give advertisers a way to target people that are interested in what they have to offer” (Gerard, 2009). This type of advertising is extremely valuable to companies because the companies know that their advertisements are being seen by consumers that have an interest in what is being sold.
A second way Facebook makes an income is through virtual gifts. “Ever sent a virtual gift on someone’s birthday?” (Kulharni, 2010). While many of these virtual gifts are no charge, some of them will cost you. Facebook receives most of the money spent on these virtual gifts. When the virtual gifts are provided by a company other than Facebook, Facebook still receives a portion of the sale.
Games and applications are another avenue for Facebook to make a profit. “Let us...